PART I [Business Overview](index=4&type=section&id=Item%201.%20Business) Mitek is a leading innovator in mobile image capture and digital identity verification solutions, leveraging computer vision, AI, and machine learning to serve over 7,500 financial services and fintech organizations globally - Mitek serves over **7,500** financial services organizations and fintech brands globally with mobile image capture and digital identity verification solutions[18](index=18&type=chunk) - In May 2021, Mitek acquired ID R&D, an award-winning provider of AI-based voice and face biometrics and liveness detection, to enhance security against digital fraud threats[19](index=19&type=chunk)[21](index=21&type=chunk) [Product and Technology Overview](index=4&type=page&id=Product%20and%20Technology%20Overview) Mitek's technology stack includes a software development kit for mobile image capture and a cloud software platform that uses AI and machine learning to classify and extract data for mobile check deposits and identity document authentication - Mitek's core technology utilizes patented algorithms for image quality analysis, repair, document identification, data extraction, and authentication of identity documents[24](index=24&type=chunk) [Key Products](index=4&type=page&id=Products) Mitek's product portfolio includes Mobile Deposit® for remote check deposits, Mobile Verify® for identity verification, Mobile Fill® for automated form completion, MiSnap™ for quality image capture, CheckReader™ and Check Intelligence for check data extraction and fraud prevention, and ID_CLOUD™ for automated identity validation - Mobile Deposit® has processed over **five billion** check deposits and is used by millions in the U.S. and Canada[25](index=25&type=chunk) - Mobile Verify® combines image capture with document authentication and biometric face comparison to validate identity documents and match portraits with selfies[27](index=27&type=chunk) - CheckReader™ is deployed within **eight** of the top **ten** U.S.-based banks, **90%** of French and Brazilian Banks, and **100%** of United Kingdom banks[30](index=30&type=chunk) - IDLive® Face is the industry's first passive facial liveness detection product, critical for fraud prevention and iBeta Levels **1** and **2** Presentation Attack Detection (PAD) compliant[35](index=35&type=chunk) [Sales and Marketing](index=6&type=page&id=Sales%20and%20Marketing) Mitek generates revenue primarily from the sale of software licenses (on-premise and transactional SaaS) and transaction fees, supplemented by maintenance and professional services - Revenue is predominantly derived from software licenses and transaction fees, with maintenance and professional services contributing to a lesser extent[39](index=39&type=chunk) Revenue Concentration by Customer (FY2019-2021) | Fiscal Year | Customer Revenue | % of Total Revenue | | :---------- | :--------------- | :----------------- | | 2021 | $20.2 million | 17% | | 2020 | $15.8 million | 16% | | 2019 | $22.8 million (from 2 customers) | 17% and 10% | Revenue Breakdown by Product Category (FY2019-2021) | Product Category | 2021 | 2020 | 2019 | | :--------------- | :--- | :--- | :--- | | Deposits revenue | 63% | 67% | 67% | | Identity verification revenue | 37% | 33% | 33% | | International sales | 26% | 24% | 31% | [Intellectual Property](index=6&type=page&id=Intellectual%20Property) Mitek protects its proprietary technology through a combination of **77** U.S. patents (expiring **2026-2037**), **18** pending domestic and international patent applications, **38** registered trademarks, trade secrets, and non-disclosure agreements - As of September 30, 2021, Mitek holds **77** issued U.S. patents with expiration dates ranging from **2026** through **2037**, and has **18** additional domestic and international patent applications[44](index=44&type=chunk) - The company also has **38** registered trademarks and relies on trade secret and copyright laws, as well as confidentiality agreements, to protect its intellectual property[43](index=43&type=chunk)[44](index=44&type=chunk) [Market Opportunities, Challenges, and Risks](index=7&type=page&id=Market%20Opportunities%2C%20Challenges%2C%20and%20Risks) Mitek anticipates growth in its deposits and identity verification businesses driven by increasing consumer demand for digital financial services, stricter regulations, and the rise of online marketplaces - Mitek predicts growth in its deposits and identity verification products due to increased consumer adoption of digital financial services, more stringent regulations, and growing usage of sharing apps and online marketplaces[45](index=45&type=chunk) - Factors that could adversely affect revenue or gross margins include competition, decline in demand for digital transactions, negative publicity, or obsolescence of software environments[46](index=46&type=chunk) - The sales and implementation cycles for Mitek's software and services can be lengthy, often **six months** or longer, which could adversely affect business if delayed or not completed[47](index=47&type=chunk) [Competition](index=7&type=page&id=Competition) The market for Mitek's products is intensely competitive and rapidly changing, with competition from customer-developed solutions, alternative identity verification methods, and competing mobile remote deposit/identity authentication technologies - Mitek faces direct and indirect competition from customer-developed solutions, companies offering alternative identity verification methods, and those with competing mobile remote deposit capture or identity authentication technologies[51](index=51&type=chunk) - Primary competitive advantages include mobile auto image capture user experience, patented science, scalability, and architectural software design allowing for easy modification and upgrades[53](index=53&type=chunk) [Research and Development](index=8&type=page&id=Research%20and%20Development) Mitek's future success relies on continuous research and development to maintain and improve core technologies, enhance existing products, and develop new solutions Research and Development Expenses (FY2019-2021) | Fiscal Year | R&D Expenses (in millions) | | :---------- | :------------------------- | | 2021 | $28.0 | | 2020 | $22.9 | | 2019 | $21.9 | - R&D expenses increased by **23%** in fiscal year **2021** compared to **2020**, and are expected to increase further in fiscal year **2022**[59](index=59&type=chunk) [Human Capital Resources](index=8&type=page&id=Human%20Capital%20Resources) As of September 30, 2021, Mitek had **448** employees globally, with a significant portion dedicated to sales, marketing, professional services, and research and development Employee Breakdown as of September 30, 2021 | Category | Number of Employees | | :------- | :------------------ | | Total | 448 | | U.S. | 176 | | International | 272 | | Full-time | 435 | | Sales & Marketing, Professional Services, Document Review | 221 | | Research & Development and Support | 176 | | Executive, Finance, Network Admin, Other | 51 | [Available Information](index=8&type=page&id=Available%20Information) Mitek Systems, Inc., incorporated in Delaware in **1986**, is subject to SEC reporting requirements and files annual, quarterly, and current reports - Mitek Systems, Inc. is a Delaware corporation, subject to the reporting requirements of the Exchange Act, and files reports on Form **10-K**, **10-Q**, and **8-K**[61](index=61&type=chunk) [Risk Factors](index=9&type=page&id=Item%201A.%20Risk%20Factors) Mitek faces various risks, including business and operational risks such as reliance on a few core technologies, declining check usage, potential intellectual property infringement claims, intense competition, and challenges in integrating acquisitions - Substantially all revenue is derived from a few types of technologies, making the business vulnerable if these technologies do not maintain market acceptance[63](index=63&type=chunk) - The company is involved in ongoing patent infringement litigation, including lawsuits filed by USAA against its customers (Wells Fargo, PNC, BBVA), which could result in substantial costs if Mitek is obligated to indemnify customers[67](index=67&type=chunk)[69](index=69&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk) - Mitek identified a material weakness in its internal control over financial reporting related to the valuation of the contingent consideration liability from the ID R&D acquisition, which could impair its ability to produce timely and accurate financial statements[148](index=148&type=chunk)[150](index=150&type=chunk) [Risks Associated With Our Business and Operations](index=9&type=page&id=Risks%20Associated%20With%20Our%20Business%20and%20Operations) Operational risks include dependence on a limited number of technologies, the declining use of checks, and the potential for costly intellectual property infringement litigation - The decline in check usage and the rise of alternatives like Zelle and Venmo could negatively impact Mitek's business[65](index=65&type=chunk) - Integration of acquired businesses (ICAR, A2iA, ID R&D) presents difficulties in managing complex systems, technology, workforces, and potential unknown liabilities, which could adversely affect financial results[93](index=93&type=chunk)[94](index=94&type=chunk) - Defects or malfunctions in Mitek's complex and continually modified products could harm its reputation, sales, and profitability, potentially leading to liability[86](index=86&type=chunk) [Risks Related to Investing in Our Common Stock](index=18&type=page&id=Risks%20Related%20to%20Investing%20in%20Our%20Common%20Stock) Investing in Mitek's common stock carries risks such as potential volatility from the exploration of strategic alternatives, limited influence for other stockholders due to concentrated ownership, and possible stock price decline from future insider sales - Concentration of ownership among current and former directors and executive officers (approximately **3.4%** as of Jan **22**, **2

Company Overview - Mitek is a global leader in mobile capture and identity verification, protecting over 80 million consumers and serving over 7,500 global customers[5] - The company utilizes a highly scalable cloud platform and employs AI and machine learning techniques with patented IP[5] Financial Performance - FY21 full-year revenue reached $119.8 million, representing an 18% year-over-year growth[6, 34] - The company achieved a 29% non-GAAP operating margin in FY21[6, 35] - Cash flow from operations in FY21 was $37.4 million[6, 35] - Q4 FY21 revenue was $33.3 million, a 9% increase year-over-year[37] - Transactional SaaS revenue in Q4 FY21 grew by 26% year-over-year to $10.2 million[37] Market and Growth - Mitek addresses a global market for identity verification estimated at $15.8 billion, growing at a CAGR of 15.6%[16] - The company's identity (ID) revenue grew by 32% in FY21[6, 34] - Deposits revenue grew by 11% in FY21[6, 34] - Mitek has enabled more than 4 billion mobile deposits, totaling $1.5 trillion in cumulative check value[13] Technology and Solutions - Mitek is the inventor of Mobile Deposit® and Check Fraud Defender™[12] - The company's Mobile Verify® solution bridges the gap from the physical to the digital world[19] - Mitek's continuous learning engine processes millions of transactions monthly, leveraging ID document experts and AI/machine learning[26]

Financial Data and Key Metrics Changes - Mitek achieved record revenue of $119.8 million for fiscal 2021, representing an 18% year-over-year growth [8][26] - Non-GAAP net income reached $34.2 million, or $0.76 per diluted share, up 19% year-over-year [8][28] - Cash flow from operations was a record $37.4 million for the full year [29] Business Line Data and Key Metrics Changes - Software and hardware revenue for Q4 was $17.8 million, down 1% year-over-year, primarily due to lower software revenue from legacy on-prem ID products [21] - Services and other revenues increased by 22% year-over-year to $15.5 million, driven by a 26% increase in transactional SaaS revenue [22] - Identity verification revenue increased 24% year-over-year to $11.3 million, while deposits revenue increased 2% year-over-year to $21.9 million [22] Market Data and Key Metrics Changes - The identity verification market is projected to grow significantly, with an estimated spend of $800 million in 2021 expected to rise to $1.2 billion by 2025, indicating a CAGR of around 15% [42] - The biometric segments are anticipated to hold the largest market share in digital identity solutions [13] Company Strategy and Development Direction - Mitek is focusing on expanding its product offerings and markets served, with key investments in technology and personnel [8][9] - The acquisition of ID R&D enhances Mitek's capabilities in AI-based voice and face biometrics, addressing sophisticated fraud threats [9][10] - The company plans to invest further in strategic acquisitions to accelerate innovation in fraud prevention [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's positioning for growth, citing strong demand for fraud-fighting offerings amid increasing digital transactions [19] - The ongoing digital transformation and the need for high-trust identity verification services are seen as key growth drivers [13][14] Other Important Information - Mitek's Check Fraud Defender technology has been adopted by 20% of the top 25 U.S. banks, demonstrating strong initial traction [11] - The company repurchased approximately 10,000 shares for $190,000 as part of a $15 million share buyback program [29] Q&A Session Summary Question: How is the sales process for Check Fraud Defender going? - Management indicated strong pull from large banks familiar with the on-premise solution, while smaller banks are more evangelical in their adoption [35][36] Question: What is the normalized growth for identity verification excluding on-prem business? - Management believes that growth rates for identity verification will exceed the reported 24% once legacy products are excluded [40][41] Question: Is the identity services business profitable? - The identity business is currently a cash consumer, but management expects it to be breakeven to cash flow positive by FY 2023 [70][71] Question: How do operating expenses relate to revenue growth? - Management stated that operating expenses will grow slower than revenue, with disciplined investments planned [73]

PART I. FINANCIAL INFORMATION [ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) Mitek Systems' unaudited consolidated financial statements and notes on accounting policies, acquisitions, investments, and debt [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Consolidated balance sheets show increased assets and equity, driven by cash, investments, and convertible senior notes issuance Consolidated Balance Sheets (in thousands) | Metric | June 30, 2021 (Unaudited) | September 30, 2020 | | :-------------------------------- | :-------------------------- | :------------------- | | Total assets | $422,398 | $169,154 | | Total liabilities | $233,874 | $36,911 | | Total stockholders' equity | $188,524 | $132,243 | | Cash and cash equivalents | $40,549 | $19,986 | | Short-term investments | $138,302 | $40,035 | | Convertible senior notes | $119,625 | — | [Consolidated Statements of Operations and Other Comprehensive Income](index=4&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Other%20Comprehensive%20Income) The company reported substantial revenue and net income growth for the three and nine months ended June 30, 2021 Consolidated Statements of Operations and Other Comprehensive Income (in thousands) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Nine Months Ended June 30, 2021 | Nine Months Ended June 30, 2020 | | :--------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Total revenue | $31,778 | $25,413 | $86,526 | $70,672 | | Operating income | $5,432 | $1,434 | $9,352 | $2,796 | | Interest expense | $2,223 | — | $3,543 | — | | Net income | $2,985 | $1,348 | $6,171 | $2,816 | | Net income per share—basic | $0.07 | $0.03 | $0.14 | $0.07 | | Net income per share—diluted | $0.07 | $0.03 | $0.14 | $0.07 | [Consolidated Statements of Stockholders' Equity](index=5&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity increased significantly due to net income, stock-based compensation, acquisition-related share issuance, and convertible senior notes warrants Consolidated Statements of Stockholders' Equity (in thousands) | Metric | June 30, 2021 | September 30, 2020 | | :--------------------------------- | :-------------- | :----------------- | | Total Stockholders' Equity | $188,524 | $132,243 | | Additional Paid-In Capital | $195,942 | $146,518 | | Accumulated Deficit | $(7,823) | $(13,994) | - Acquisition-related shares issued contributed **$13,944 thousand** to additional paid-in capital for the three months ended June 30, 2021[16](index=16&type=chunk) - Sale of convertible senior notes warrants added **$23,909 thousand** to additional paid-in capital for the nine months ended June 30, 2021[18](index=18&type=chunk) [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow increased, investing activities used more cash for acquisitions and investments, and financing activities provided significant cash from convertible notes Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Nine Months Ended June 30, 2021 | Nine Months Ended June 30, 2020 | | :----------------------------------- | :------------------------------ | :------------------------------ | | Net cash provided by operating activities | $25,016 | $17,375 | | Net cash used in investing activities | $(147,423) | $(15,530) | | Net cash provided by financing activities | $142,846 | $260 | | Net increase in cash and cash equivalents | $20,563 | $2,190 | | Cash and cash equivalents at end of period | $40,549 | $18,938 | - Proceeds from the issuance of convertible senior notes totaled **$155,250 thousand** in the nine months ended June 30, 2021[20](index=20&type=chunk) - Acquisitions, net of cash acquired, used **$12,549 thousand** in investing activities for the nine months ended June 30, 2021[20](index=20&type=chunk) [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Detailed explanations of Mitek's business, accounting policies, ID R&D acquisition, investments, goodwill, equity, taxes, convertible notes, and legal matters [1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=8&type=section&id=1.%20NATURE%20OF%20OPERATIONS%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) Mitek Systems specializes in mobile image capture and digital identity verification, leveraging AI and machine learning, with recent acquisition of ID R&D - Mitek is a leading innovator of mobile image capture and digital identity verification solutions, serving over **7,500 financial services organizations** and fintech brands globally[22](index=22&type=chunk) - Key products include Mobile Deposit® (over **five billion check deposits processed**), Mobile Verify®, Mobile Fill®, and CheckReader™[23](index=23&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk) - In May 2021, Mitek acquired ID R&D, Inc., a provider of AI-based voice and face biometrics and liveness detection, to simplify and secure the transaction lifecycle[27](index=27&type=chunk) - The company markets products globally through direct sales teams and channel partners in the U.S., Europe, and Latin America[28](index=28&type=chunk) Potentially Dilutive Common Shares Excluded from EPS Calculation (in thousands) | Item | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Nine Months Ended June 30, 2021 | Nine Months Ended June 30, 2020 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Stock options | 524 | 207 | 593 | 270 | | RSUs | 1,248 | 1,718 | 1,177 | 1,577 | | ESPP common stock equivalents | 73 | 73 | 27 | — | | Performance options | 263 | — | 224 | — | | Performance RSUs | 98 | 67 | 109 | 26 | | Convertible senior notes | 7,448 | — | 3,983 | — | | Warrants | 7,448 | — | 3,983 | — | | Total potentially dilutive common shares outstanding | 17,102 | 2,065 | 10,096 | 1,873 | [2. REVENUE RECOGNITION](index=15&type=section&id=2.%20REVENUE%20RECOGNITION) Mitek recognizes revenue from software and hardware upon delivery, and from services and transactional SaaS over time, applying a five-step recognition process - Software and hardware revenue is recognized upon delivery of licenses or shipment of hardware[71](index=71&type=chunk) - Services and other revenue, including transactional SaaS, maintenance, and professional services, is recognized over the period services are performed[72](index=72&type=chunk) Revenue Disaggregated by Major Product Category (in thousands) | Major Product Category | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Nine Months Ended June 30, 2021 | Nine Months Ended June 30, 2020 | | :--------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Deposits software and hardware | $15,817 | $12,222 | $38,705 | $32,822 | | Deposits services and other | $4,963 | $4,726 | $14,887 | $13,399 | | **Deposits revenue** | **$20,780** | **$16,948** | **$53,592** | **$46,221** | | Identity verification software and hardware | $1,156 | $990 | $3,583 | $3,358 | | Identity verification services and other | $9,842 | $7,475 | $29,351 | $21,093 | | **Identity verification revenue** | **$10,998** | **$8,465** | **$32,934** | **$24,451** | | **Total revenue** | **$31,778** | **$25,413** | **$86,526** | **$70,672** | Contract Balances (in thousands) | Item | June 30, 2021 | September 30, 2020 | | :---------------------------------- | :-------------- | :----------------- | | Contract assets, current | $3,610 | $5,187 | | Contract assets, non-current | $3,723 | $4,468 | | Contract liabilities (deferred revenue), current | $11,896 | $7,973 | | Contract liabilities (deferred revenue), non-current | $614 | $1,597 | [3. BUSINESS COMBINATIONS](index=17&type=section&id=3.%20BUSINESS%20COMBINATIONS) Mitek acquired ID R&D, Inc. on May 28, 2021, for up to $49.0 million, resulting in significant goodwill and intangible assets - Mitek acquired ID R&D, Inc. on May 28, 2021, for up to **$49.0 million**, comprising **$13.0 million cash**, **$13.9 million in common stock**, and up to **$22.1 million in earnout payments**[81](index=81&type=chunk)[82](index=82&type=chunk) - The estimated fair value of earnout consideration was **$15.3 million** at closing, determined using a discounted cash flow methodology[83](index=83&type=chunk) Estimated Fair Values of Assets Acquired and Liabilities Assumed from ID R&D Acquisition (in thousands) | Item | Amount | | :-------------------------- | :------- | | Current assets | $385 | | Property, plant, and equipment | $114 | | Intangible assets | $14,190 | | Goodwill | $30,866 | | Current liabilities | $(397) | | Other non-current liabilities | $(3,236) | | **Net assets acquired** | **$41,922** | Estimated Fair Values and Useful Lives of Intangible Assets Acquired from ID R&D Acquisition (in thousands) | Intangible Asset | Amortization Period | Amount Assigned | | :----------------------- | :------------------ | :-------------- | | Completed technologies | 7.0 years | $11,280 | | Customer relationships | 3.0 years | $2,540 | | Trade names | 5.0 years | $370 | | **Total intangible assets acquired** | | **$14,190** | [4. INVESTMENTS](index=19&type=section&id=4.%20INVESTMENTS) Mitek's investment portfolio, primarily available-for-sale debt securities, significantly increased and is carried at fair value, with detailed fair value hierarchy disclosures Investments by Type of Security (in thousands) | Security Type | June 30, 2021 Fair Market Value | September 30, 2020 Fair Market Value | | :---------------------------------- | :------------------------------ | :------------------------------- | | U.S. Treasury, short-term | $5,241 | $10,283 | | Asset-backed securities, short-term | $6,052 | $4,759 | | Corporate debt securities, short-term | $127,009 | $24,993 | | U.S. Treasury, long-term | $4,997 | — | | Foreign government and agency securities, long-term | $2,919 | — | | Corporate debt securities, long-term | $28,727 | $1,963 | | **Total** | **$174,945** | **$41,998** | - All investments are classified as available-for-sale debt securities, with unrealized gains and losses included in accumulated other comprehensive income (loss)[89](index=89&type=chunk)[90](index=90&type=chunk) - The fair value of the Notes Hedge and embedded conversion derivative are estimated using a Black-Scholes model and classified as Level 2 in the fair value hierarchy[94](index=94&type=chunk) Acquisition-Related Contingent Consideration (Level 3 Fair Value, in thousands) | Item | Amount | | :------------------------------------------ | :------- | | Balance at September 30, 2020 | $753 | | Contingent consideration associated with ID R&D Acquisition | $15,280 | | Foreign currency effect on contingent consideration | $29 | | Payment of contingent consideration | $(782) | | **Balance at June 30, 2021** | **$15,280** | [5. GOODWILL AND INTANGIBLE ASSETS](index=22&type=section&id=5.%20GOODWILL%20AND%20INTANGIBLE%20ASSETS) Goodwill increased significantly to **$67.1 million** due to the ID R&D acquisition, with intangible assets also rising and amortization expense of **$5.2 million** Changes in Goodwill Balance (in thousands) | Item | Amount | | :-------------------------- | :------- | | Balance at September 30, 2020 | $35,669 | | Acquisition of ID R&D | $30,866 | | Foreign currency effect on goodwill | $515 | | **Balance at June 30, 2021** | **$67,050** | Intangible Assets (in thousands) | Item | June 30, 2021 Net | September 30, 2020 Net | | :----------------------- | :---------------- | :------------------- | | Completed technologies | $19,761 | $10,925 | | Customer relationships | $8,343 | $8,238 | | Trade names | $453 | $126 | | **Total intangible assets** | **$28,557** | **$19,289** | - Amortization expense related to acquired intangible assets was **$5.2 million** for the nine months ended June 30, 2021, an increase from **$4.8 million** in the prior year[97](index=97&type=chunk) [6. STOCKHOLDERS' EQUITY](index=23&type=section&id=6.%20STOCKHOLDERS'%20EQUITY) Stock-based compensation expense increased, and a new **$15 million** share repurchase program was authorized in June 2021 Stock-Based Compensation Expense (in thousands) | Expense Category | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Nine Months Ended June 30, 2021 | Nine Months Ended June 30, 2020 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Cost of revenue | $89 | $73 | $258 | $199 | | Selling and marketing | $857 | $693 | $2,537 | $1,859 | | Research and development | $797 | $721 | $2,313 | $2,075 | | General and administrative | $1,124 | $1,014 | $3,474 | $2,979 | | **Total stock-based compensation expense** | **$2,867** | **$2,501** | **$8,582** | **$7,112** | - As of June 30, 2021, **$21.0 million** of unrecognized compensation expense related to outstanding stock options and RSUs is expected to be recognized over approximately **2.4 years**[100](index=100&type=chunk) - A new share repurchase program for up to **$15 million** was authorized on June 15, 2021, expiring June 30, 2022, with no shares purchased as of that date[111](index=111&type=chunk) [7. INCOME TAXES](index=26&type=section&id=7.%20INCOME%20TAXES) Mitek recorded income tax provisions of **$0.3 million** and **$0.2 million** for the three and nine months ended June 30, 2021, respectively, with effective tax rates of **9%** and **3%** Income Tax Provision and Effective Tax Rate (in millions) | Period | Income Tax Provision | Effective Tax Rate | | :------------------------------- | :------------------------------- | :----------------- | | Three Months Ended June 30, 2021 | $0.3 | 9% | | Three Months Ended June 30, 2020 | $0.2 | 15% | | Nine Months Ended June 30, 2021 | $0.2 | 3% | | Nine Months Ended June 30, 2020 | $0.5 | 14% | - The difference from the U.S. federal statutory tax rate is mainly due to excess tax benefits from stock options and RSUs, foreign/state taxes, and federal/state R&D credits[118](index=118&type=chunk) [8. CONVERTIBLE SENIOR NOTES](index=28&type=section&id=8.%20CONVERTIBLE%20SENIOR%20NOTES) In February 2021, Mitek issued **$155.3 million** in 0.75% convertible senior notes due 2026, with a conversion option treated as an embedded derivative liability - Issued **$155.3 million** aggregate principal amount of **0.75%** convertible senior notes due 2026 in February 2021[119](index=119&type=chunk) - Net proceeds from the offering were approximately **$149.7 million**, used for general corporate purposes and to pay for the Notes Hedge[121](index=121&type=chunk) - The conversion option is accounted for as an embedded derivative liability (**$54.3 million** fair value as of June 30, 2021) due to insufficient authorized shares to settle conversions in equity[119](index=119&type=chunk)[123](index=123&type=chunk)[125](index=125&type=chunk) Interest Cost Recognized Relating to 2026 Notes (in thousands) | Item | Three Months Ended June 30, 2021 | Nine Months Ended June 30, 2021 | | :------------------------------------ | :------------------------------- | :------------------------------ | | Contractual interest expense | $290 | $463 | | Amortization of debt discount and issuance costs | $1,933 | $3,080 | | **Total interest expense recognized** | **$2,223** | **$3,543** | - The company entered into a Notes Hedge (cost **$33.2 million**) and Warrant Transactions (proceeds **$23.9 million**) to reduce potential dilution from the 2026 Notes[127](index=127&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk) [9. COMMITMENTS AND CONTINGENCIES](index=30&type=section&id=9.%20COMMITMENTS%20AND%20CONTINGENCIES) Mitek has **$9.1 million** in operating lease liabilities and is involved in legal proceedings, including patent infringement claims against its customers, which it is vigorously defending Operating Lease Liabilities Maturities (in thousands) | Fiscal Year | Operating Leases | | :---------------- | :--------------- | | 2021—remaining | $531 | | 2022 | $2,159 | | 2023 | $2,113 | | 2024 | $1,779 | | 2025 | $693 | | 2026 | $687 | | Thereafter | $1,803 | | **Total lease payments** | **$9,765** | | Less: amount representing interest | $(655) | | **Present value of future lease payments** | **$9,110** | - A claim of **€0.8 million** (**$0.9 million**) was filed against ICAR, with Mitek Holding B.V. indemnified under the acquisition agreement[136](index=136&type=chunk)[137](index=137&type=chunk) - USAA filed lawsuits against Wells Fargo and PNC Bank alleging patent infringement related to mobile deposits, with Wells Fargo settling; Mitek denies infringement and is actively monitoring/defending these claims[139](index=139&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk)[143](index=143&type=chunk) - Mitek filed a lawsuit against UrbanFT, Inc. for delinquent payments and declaratory judgment of non-infringement of patents, with patent claims dismissed for lack of jurisdiction[148](index=148&type=chunk)[149](index=149&type=chunk) [10. REVENUE CONCENTRATION](index=33&type=section&id=10.%20REVENUE%20CONCENTRATION) Mitek experiences revenue concentration from a few key customers and channel partners, with international sales contributing **23%** and **26%** of total revenue for the three and nine months ended June 30, 2021, respectively - For the three months ended June 30, 2021, three customers accounted for **16%**, **13%**, and **11%** of total revenue, respectively[152](index=152&type=chunk) - For the nine months ended June 30, 2021, two customers accounted for **17%** and **10%** of total revenue[152](index=152&type=chunk) - International sales accounted for approximately **23%** and **25%** of total revenue for the three months ended June 30, 2021 and 2020, respectively[155](index=155&type=chunk) - International sales accounted for approximately **26%** and **25%** of total revenue for the nine months ended June 30, 2021 and 2020, respectively[155](index=155&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=34&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses Mitek's financial performance, strategic initiatives, market opportunities, and risks, highlighting revenue growth and changes in operating expenses and liquidity [Overview](index=34&type=section&id=Overview) Mitek Systems is a leading innovator in mobile image capture and digital identity verification, leveraging AI and machine learning, with solutions like Mobile Deposit® and Mobile Verify® - Mitek is a leading innovator of mobile image capture and digital identity verification solutions, serving over **7,500 financial services organizations** and fintech brands[160](index=160&type=chunk) - Key products include Mobile Deposit® (mobile check deposit), Mobile Verify® (online identity verification and fraud detection), Mobile Fill® (application prefill), and CheckReader™ (check data extraction)[161](index=161&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk) - The acquisition of ID R&D in May 2021 adds AI-based voice and face biometrics and liveness detection to Mitek's offerings[165](index=165&type=chunk) [Third Quarter Fiscal 2021 Highlights](index=35&type=section&id=Third%20Quarter%20Fiscal%202021%20Highlights) Mitek's third quarter of fiscal 2021 saw **25%** revenue growth and **121%** net income increase, alongside the ID R&D acquisition and patent portfolio expansion Third Quarter Fiscal 2021 Financial Highlights | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Change (%) | | :--------------------------------- | :------------------------------- | :------------------------------- | :--------- | | Revenue | $31.8 million | $25.4 million | 25% | | Net income | $3.0 million | $1.3 million | 121% | | Net income per diluted share | $0.07 | $0.03 | 133% | | Cash provided by operating activities (nine months) | $9.0 million | $17.4 million | (48%) | - Acquired ID R&D, Inc. on May 28, 2021, for an aggregate purchase price of up to **$49.0 million**[168](index=168&type=chunk) - Increased patent portfolio to **73 issued patents** as of June 30, 2021, with **15 additional patent applications** pending[167](index=167&type=chunk) [Market Opportunities, Challenges & Risks](index=35&type=section&id=Market%20Opportunities,%20Challenges%20%26%20Risks) Mitek sees market opportunities in digital transformation and regulatory compliance but faces competition, demand fluctuations, lengthy sales cycles, and COVID-19 uncertainties - Market opportunities are driven by financial institutions, fintechs, and other companies seeking superior digital customer experiences, fraud detection, and regulatory compliance[169](index=169&type=chunk) - Anticipated growth in deposits and identity verification products based on trends in payments, online lending, regulations, and digital service demand[169](index=169&type=chunk) - Challenges include competition, potential declines in demand for digital transactions, negative publicity, and obsolescence of software environments[170](index=170&type=chunk) - Sales and implementation cycles can be lengthy, potentially impacting business and financial results[171](index=171&type=chunk) - The COVID-19 pandemic's impact on business activity, operations, and financial results remains uncertain, though it may accelerate digital technology adoption[176](index=176&type=chunk)[178](index=178&type=chunk) [Results of Operations](index=36&type=section&id=Results%20of%20Operations) Mitek experienced strong revenue growth for both the three and nine months ended June 30, 2021, driven by Mobile Deposit® and Mobile Verify® sales, with increased operating expenses offset by lower litigation costs [Comparison of the Three Months Ended June 30, 2021 and 2020](index=37&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20June%2030,%202021%20and%202020) For the three months ended June 30, 2021, total revenue increased by **25%** to **$31.8 million**, and net income surged by **121%** to **$3.0 million**, with notable interest expense from new convertible notes Results of Operations (Three Months Ended June 30, in thousands) | Metric | 2021 | 2020 | Increase (Decrease) $ | Increase (Decrease) % | | :-------------------------------- | :----- | :----- | :-------------------- | :-------------------- | | Total revenue | $31,778 | $25,413 | $6,365 | 25% | | Software and hardware revenue | $16,973 | $13,212 | $3,761 | 28% | | Services and other revenue | $14,805 | $12,201 | $2,604 | 21% | | Cost of revenue | $3,410 | $3,496 | $(86) | (2)% | | Selling and marketing | $8,133 | $7,011 | $1,122 | 16% | | Research and development | $6,946 | $5,891 | $1,055 | 18% | | General and administrative | $5,633 | $5,884 | $(251) | (4)% | | Acquisition-related costs and expenses | $2,224 | $1,697 | $527 | 31% | | Interest expense | $2,223 | — | $2,223 | 100% | | Net income | $2,985 | $1,348 | $1,637 | 121% | - Increase in software and hardware revenue primarily due to higher Mobile Deposit® software sales, partially offset by declines in CheckReader™ and ID_CLOUD™[181](index=181&type=chunk) - Services and other revenue growth driven by a **33%** increase in Mobile Verify® transactional SaaS revenue and higher Mobile Deposit® transactional SaaS revenue[181](index=181&type=chunk) - General and administrative expenses decreased due to lower intellectual property litigation costs (**$0.9 million**), partially offset by higher executive transition and personnel-related costs[186](index=186&type=chunk) [Comparison of the Nine Months Ended June 30, 2021 and 2020](index=39&type=section&id=Comparison%20of%20the%20Nine%20Months%20Ended%20June%2030,%202021%20and%202020) For the nine months ended June 30, 2021, total revenue increased by **22%** to **$86.5 million**, and net income more than doubled to **$6.2 million**, with rising operating expenses and new interest costs Results of Operations (Nine Months Ended June 30, in thousands) | Metric | 2021 | 2020 | Increase (Decrease) $ | Increase (Decrease) % | | :-------------------------------- | :----- | :----- | :-------------------- | :-------------------- | | Total revenue | $86,526 | $70,672 | $15,854 | 22% | | Software and hardware revenue | $42,288 | $36,180 | $6,108 | 17% | | Services and other revenue | $44,238 | $34,492 | $9,746 | 28% | | Cost of revenue | $11,340 | $9,615 | $1,725 | 18% | | Selling and marketing | $24,048 | $20,345 | $3,703 | 18% | | Research and development | $19,801 | $16,764 | $3,037 | 18% | | General and administrative | $16,409 | $16,382 | $27 | —% | | Acquisition-related costs and expenses | $5,576 | $4,884 | $692 | 14% | | Interest expense | $3,543 | — | $3,543 | 100% | | Net income | $6,171 | $2,816 | $3,355 | 119% | - Software and hardware revenue increased due to higher Mobile Deposit® software sales and identity verification hardware products[193](index=193&type=chunk) - Services and other revenue growth driven by **$8.3 million** increase in Mobile Verify® transactional SaaS revenue, plus higher maintenance and hosted mobile deposit transactional revenue[193](index=193&type=chunk) - Selling and marketing expenses increased due to higher personnel-related costs (**$4.1 million**) and product promotion costs (**$0.4 million**), partially offset by decreased travel expenses (**$0.8 million**) due to COVID-19[195](index=195&type=chunk) - General and administrative expenses remained consistent, with higher personnel and executive transition costs offset by decreased intellectual property litigation costs (**$1.3 million**)[197](index=197&type=chunk) [Liquidity and Capital Resources](index=41&type=section&id=Liquidity%20and%20Capital%20Resources) Mitek's cash and investments significantly increased by **248%** to **$215.5 million**, primarily from convertible senior notes issuance, with sufficient liquidity for the next twelve months - Cash and cash equivalents and investments increased by **$153.5 million** (**248%**) to **$215.5 million** as of June 30, 2021, from **$62.0 million** on September 30, 2020[203](index=203&type=chunk) - Net cash provided by operating activities was **$25.0 million** for the nine months ended June 30, 2021[204](index=204&type=chunk) - Net cash used in investing activities was **$147.4 million**, primarily for net purchases of investments (**$133.9 million**) and the ID R&D acquisition (**$12.5 million**)[206](index=206&type=chunk) - Net cash provided by financing activities was **$142.8 million**, mainly from **$149.7 million** net proceeds from 2026 Notes issuance[208](index=208&type=chunk) - Working capital was **$167.6 million** at June 30, 2021, up from **$59.8 million** at September 30, 2020[225](index=225&type=chunk) [Off Balance Sheet Arrangements](index=43&type=section&id=Off%20Balance%20Sheet%20Arrangements) Mitek Systems, Inc. had no off-balance sheet arrangements as of June 30, 2021 - The Company had no off balance sheet arrangements as of June 30, 2021[226](index=226&type=chunk) [Changes in Critical Accounting Policies](index=43&type=section&id=Changes%20in%20Critical%20Accounting%20Policies) The primary change in critical accounting policies relates to the Convertible Senior Notes Hedge and Embedded Conversion Derivative, established in February 2021 - A new accounting policy was established for Convertible Senior Notes Hedge and Embedded Conversion Derivative due to the issuance of the 2026 Notes in February 2021[228](index=228&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=44&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) Mitek is exposed to market risks from interest rates on its investment portfolio and foreign currency fluctuations, primarily the Euro, but a **100 basis point** interest rate change would not materially impact short-maturity investments - Investment portfolio consists of cash equivalents and marketable securities (corporate debt, commercial paper, U.S. Treasury, asset-backed securities), with a primary objective to preserve principal[229](index=229&type=chunk) - A hypothetical **100 basis point** increase or decrease in market interest rates would not materially impact the fair value of investments due to their relatively short maturities[230](index=230&type=chunk) - Exposed to foreign currency exchange risks, particularly between the U.S. dollar and the Euro, due to operations in France, the Netherlands, Russia, and Spain[231](index=231&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=44&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Mitek's disclosure controls were effective as of June 30, 2021, excluding the newly acquired ID R&D, with no other material changes to internal controls despite remote work - Disclosure controls and procedures were effective as of June 30, 2021, based on management's evaluation[233](index=233&type=chunk) - Management's assessment of internal control over financial reporting did not include ID R&D's internal controls due to the recent acquisition[235](index=235&type=chunk) - No other material changes to internal control over financial reporting occurred during the quarter, and remote work due to COVID-19 has not materially impacted controls[235](index=235&type=chunk) PART II. OTHER INFORMATION [ITEM 1. LEGAL PROCEEDINGS](index=46&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) Mitek is involved in various legal proceedings, but management believes their aggregate disposition will not materially affect the company's financial condition or results of operations - The company is subject to various claims and legal proceedings arising in the ordinary course of business[238](index=238&type=chunk) - Management believes the disposition of these matters, in aggregate, will not materially affect the company's financial condition or results of operations[238](index=238&type=chunk) [ITEM 1A. RISK FACTORS](index=46&type=section&id=ITEM%201A.%20RISK%20FACTORS) Mitek's business is subject to various risks and uncertainties, consistent with prior disclosures, with no material changes reported - No material changes in risk factors from those disclosed in the Annual Report on Form 10-K and the Form 10-Q for the period ended March 31, 2021[239](index=239&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=46&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) There were no unregistered sales of Mitek's equity securities during the quarter ended June 30, 2021, that were not previously disclosed - No unregistered sales of equity securities occurred during the quarter ended June 30, 2021, that were not previously disclosed[240](index=240&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=46&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) Mitek reported no defaults upon senior securities during the period - No defaults upon senior securities were reported[241](index=241&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=46&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) Mitek had no mine safety disclosures to report - No mine safety disclosures were reported[242](index=242&type=chunk) [ITEM 5. OTHER INFORMATION](index=46&type=section&id=ITEM%205.%20OTHER%20INFORMATION) No other information was reported in this section - No other information was reported[243](index=243&type=chunk) [ITEM 6. EXHIBITS](index=47&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed with the Form 10-Q, including various agreements, corporate documents, and certifications - Includes the Agreement and Plan of Merger for the ID R&D acquisition (Exhibit 2.3)[245](index=245&type=chunk) - Lists the Indenture for the **0.75%** Convertible Senior Notes due 2026 (Exhibit 4.1)[245](index=245&type=chunk) - Contains certifications from the Chief Executive Officer and Chief Financial Officer (Exhibits 31.1, 31.2, 32.1)[245](index=245&type=chunk) [Signatures](index=49&type=section&id=Signatures) The report is duly signed on behalf of Mitek Systems, Inc. by its Chief Executive Officer and Chief Financial Officer on August 5, 2021 - Report signed by Scipio Maximus Carnecchia (Chief Executive Officer) and Frank Teruel (Chief Financial Officer) on August 5, 2021[249](index=249&type=chunk)[250](index=250&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (I.R.S. Employer Identification No.) 600 B Street, Suite 100 San Diego, California 92101 (Address of principal executive offices) (Zip Code) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission File Number 001 ...

Investor presentation : MITK Q2 FY21 © 2021 Mitek Systems Inc. 1 ● Safe harbor statement Forward-looking statements contained in this presentation involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially and adversely from those expressed or implied by such forward-looking statements. Forward-looking statements may include, but are not limited to, statements relating to our outlook or expectations for earnings, r ...

Mitek Systems, Inc. (NASDAQ:MITK) Q2 2021 Earnings Conference Call April 29, 2021 4:30 PM ET Company Participants Todd Kehrli - Investor Relations-MKR Group Max Carnecchia - Chief Executive Officer Jeff Davison - Chief Financial Officer Conference Call Participants Jake White - William Blair Mike Grondahl - Northland Securities Hamzah Mazari - Jefferies. Mark Schappel - Benchmark Operator Good day and welcome to the Mitek Systems Second Quarter Fiscal 2021 Financial Results Conference Call. Today's conferen ...

Financial Performance - Total revenue for the three months ended December 31, 2020, was $26.0 million, an increase of 18% compared to $22.1 million in the same period of 2019[148] - Net income for the same period was $2.2 million, or $0.05 per diluted share, compared to net income of $0.6 million, or $0.01 per share, in the prior year[148] - Cash provided by operating activities was $8.7 million for the three months ended December 31, 2020, up from $5.2 million in the same period of 2019[148] - Services and other revenue rose by $3.1 million, or 30%, to $13.7 million, driven by a 42% increase in Mobile Verify® transactional SaaS revenue[155] - Cash and cash equivalents increased by $10.6 million, or 17%, to $72.6 million as of December 31, 2020, compared to $62.0 million on September 30, 2020[163] - Net cash provided by operating activities was $8.7 million for the three months ended December 31, 2020, compared to $5.2 million for the same period in 2019[164][165] - The company had working capital of $64.3 million at December 31, 2020, compared to $59.8 million at September 30, 2020[176] Revenue Breakdown - Software and hardware revenue increased by $0.8 million, or 7%, to $12.3 million, primarily due to increased sales of Mobile Deposit® and CheckReader™ products[154] - Cost of revenue increased by $1.2 million, or 41%, to $4.1 million for the three months ended December 31, 2020, compared to $2.9 million for the same period in 2019, representing 16% of revenue[156] Expenses - Selling and marketing expenses rose by $0.7 million, or 11%, to $7.4 million for the three months ended December 31, 2020, down to 28% of revenue from 30% in the same period in 2019[157] - Research and development expenses increased by $0.9 million, or 16%, to $6.2 million for the three months ended December 31, 2020, consistent at 24% of revenue[158] - General and administrative expenses decreased by $0.2 million, or 4%, to $5.1 million for the three months ended December 31, 2020, down to 19% of revenue from 24% in the same period in 2019[159] - Acquisition-related costs increased by $0.1 million, or 5%, to $1.7 million for the three months ended December 31, 2020, remaining at 7% of revenue[160] Tax and Other Income - Other income, net decreased by $0.2 million to $0.1 million for the three months ended December 31, 2020, primarily due to foreign currency exchange losses[161] - The company recorded an income tax benefit of $0.5 million for the three months ended December 31, 2020, yielding an effective tax rate of negative 33%[162] Market and Growth Outlook - The financial services sector represents the largest percentage of users for Mitek's solutions, with accelerated adoption in marketplaces and hospitality sectors[139] - The company anticipates growth in deposits and identity verification products due to trends in payments, online lending, and increasing demand for digital services[143] - The sales cycle for Mitek's software can be lengthy, often taking six months or longer for larger customers, which may impact financial results if delays occur[145] - Mitek's patented technology and growing product portfolio provide a competitive advantage in the mobile image capture and identity verification industry[148] Patents and Innovations - The company added new patents during the first quarter of fiscal 2021, bringing the total number of issued patents to 69, with 17 pending applications[148]

Investor presentation : MITK Q1 FY21 © 2021 Mitek Systems Inc. 1 ● ● Safe harbor statement ● ● Forward-looking statements contained in this presentation involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially and adversely from those expressed or implied by such forward-looking statements. Forward-looking statements may include, but are not limited to, statements relating to our outlook or expectations for earni ...

Mitek Systems, Inc. (NASDAQ:MITK) Q1 2021 Earnings Conference Call January 28, 2021 4:30 PM ET Company Participants Todd Kehrli - Investor Relations-MKR Group Max Carnecchia - Chief Executive Officer Jeff Davison - Chief Financial Officer Conference Call Participants Bhavan Suri - William Blair Mark Schappel - Benchmark Allen Klee - Maxim Group Operator Good day everyone, and welcome to today???s Mitek Systems First Quarter Fiscal 2021 Financial Results Conference Call. Today's conference is being recorded. ...